Bitcoin Guide - Security and the importance of confirmations #Part9

By Roberto D. | CryptoFarm | 26 Feb 2020

Security and the importance of confirmations

We have seen that mining pools partially reintroduce the security issue at the bottom of the chain.

Remember though, even if there are mining pools, the further the block is away from the queue, the more likely it is that the transaction will be confirmed securely.

If it is recommended to wait for a confirmation before considering a transaction executed, for more substantial transactions it is recommended to wait for confirmations of more blocks, so that the block of your transaction moves of more positions starting from the end of the chain.

If it was possible to resolve 6 transactions in a row, you might want to wait for some more confirmation before being sure.

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If the resolution of a block takes about 10 minutes, waiting for the resolution of 6 blocks takes about an hour which, compared to the speed of execution of the credit card circuits, is obviously much greater.

However, if it is considered that a buyer can request the cancellation of a transaction up to a month after its execution, from the seller's point of view the confirmation of the transaction takes place much faster.
In fact, once confirmed the transaction can no longer be canceled.

The change of network difficulty

The choice of 10 minutes per block may seem arbitrary, but decreasing this timing could lead to problems in the stability of the network, while lengthening it could lengthen the confirmation time.

As new computers join the Bitcoin network and create ad hoc hardware for mining, the resolution time of the blocks is gradually decreasing.

To compensate for this decrease every 2 weeks the difficulty of solving the mathematical problem related to HASH is recalibrated, so as to keep the resolution time unchanged over 10 minutes.

There are other virtual currencies that have a different resolution time. For example, Litecoins have a resolution time of 2 and a half minutes per block.

To conclude ...

In summary we can define Bitcoin as a mathematically protected digital currency which is maintained by a distributed P2P network and which is based on the following cornerstones:

Digital signature to authorize transactions
Chain of transactions to transfer ownership of the currency
Blockchain to guard the order of transactions.
Attack security obtained thanks to the high improbability of a person (or even a group) to resolve multiple consecutive blocks before the rest of the network nodes

What are the positives of Bitcoin?

Bitcoin presents itself as an independent currency capable of bringing obvious benefits:

Independence from governments that cannot influence the currency, as happens for example when it is decided to place multiple FIAT currencies on the market (Quantitative Easing)
Guarantee of anonymity: the transactions are public but the address on which they occur is not tied to natural persons
Transaction costs are much lower than credit card circuits

What are the downsides instead?

Accessibility is certainly lower than that of credit card transactions which are recognized and easily interchangeable with FIAT currencies

Anonymity has led Bitcoin to become popular in illegal activities and for tax evasion.
The proof of work mechanism used to solve the blocks uses a certain computational power with consequent high energy consumption.

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